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Does Corporate Governance Influence Earnings Management in Latin American Markets?

Journal of business ethics, 2014-05, Vol.121 (3), p.419-440 [Peer Reviewed Journal]

Springer Science+Business Media 2014 ;The Author(s) 2013 ;Springer Science+Business Media Dordrecht 2014 ;ISSN: 0167-4544 ;EISSN: 1573-0697 ;DOI: 10.1007/s10551-013-1700-8 ;CODEN: JBUEDJ

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Title:
Does Corporate Governance Influence Earnings Management in Latin American Markets?
Author: González, Jesus Sáenz ; García-Meca, Emma
Subjects: Analysis ; Board of directors ; Boards of directors ; Business and Management ; Business Ethics ; Business ownership ; Business structures ; Chief executive officers ; Corporate governance ; Corruption ; Creative accounting ; Documentation ; Earnings management ; Education ; Ethics ; Europe ; Financial management ; Government ; Government corruption ; Hypotheses ; Investments ; Investors ; Knowledge ; Latin America ; Management ; Management decisions ; Ownership ; Philosophy ; Quality of Life Research ; Rule of law ; Securities markets ; Shareholders ; Stock exchanges ; Stock shares ; Stockholders ; Studies ; U.S.A
Is Part Of: Journal of business ethics, 2014-05, Vol.121 (3), p.419-440
Description: Although US and European research has documented improvement in earnings quality associated with corporate governance characteristics, the situation in Latin America is questionable, given the business environment in which firms operate, which is characterized by controlling family ownership and weak legal protection. The purpose of this study is to examine the relation between the internal mechanisms of Corporate Governance and Earnings Management measured by discretionary accrual. We use a sample of listed Latin American non-financial companies from the period 2006-2009. Our results show how in the Latin American context the role of external directors is limited and that Boards which meet more frequently take a more active position in the monitoring of insiders, so showing a lower use of manipulative practices. In addition, we find a non-linear relation between insider ownership and discretionary accruals, also pointing to the fact that ownership concentration may be a manipulative practices constrictor mechanism only when the ownership of main shareholders is moderate. The findings have important policy implications since this is, to the best of our knowledge, the first study to analyze the relation between the effectiveness of the government and the earnings management behavior. As policy implications, we document how when a country implements controls aimed at reducing corruption, strengthening the rule of law or improving the effectiveness of government, this leads to a reduction in firm earnings management.
Publisher: Dordrecht: Springer
Language: English
Identifier: ISSN: 0167-4544
EISSN: 1573-0697
DOI: 10.1007/s10551-013-1700-8
CODEN: JBUEDJ
Source: ProQuest One Psychology
Alma/SFX Local Collection
Springer Nature OA/Free Journals
ProQuest Central

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Does Corporate Governance Influence Earnings Management in Latin American Markets?

Springer Science+Business Media 2014 ;The Author(s) 2013 ;Springer Science+Business Media Dordrecht 2014 ;ISSN: 0167-4544 ;EISSN: 1573-0697 ;DOI: 10.1007/s10551-013-1700-8 ;CODEN: JBUEDJ

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